Johnson & Johnson - proposed acquisition of Synthes Inc

Market definition

The ACCC considered the impact of the proposed acquisition on national markets for the supply of individual types of medical devices, defined by reference to the pathology the surgeon is treating with the device (including the part of the body), the patient's requirements and the extent to which other devices have the same clinical effectiveness.

The ACCC focussed its assessment on the overlap in the merger parties activities in the supply of:

- thoracolumbar interbody devices (IBDs), which are used to treat spinal degeneration in the thoracolumbar part of the spine; and

- anatomical plating systems for the wrist, which are used to treat wrist fractures.

However, the ACCC did not consider it necessary to reach a definitive view on the market definition as the proposed acquisition is unlikely to raise concerns regardless of the market definition adopted.

Competition analysis

The ACCC formed the view that the proposed acquisition was unlikely to substantially lessen competition in the relevant markets.

In each product market, there were a number of well established alternative suppliers, providing products of comparable quality, similar characteristics, and clinical function together with high levels of service. These alternative suppliers would maintain competitive options for customers in the acquisition of these medical devices.

The ACCC also considered the recent history of new entry, particularly in the supply of spinal devices, through overseas based medical device companies and Australian based distributors importing and supplying medical devices, which have been approved for use overseas. The ACCC considered that the threat of expansion by these new entrants as well as the prospect of further new entry would also provide a constraint on the merged firm.

The ACCC noted that while in some product areas the merged firm would have a high market share, the markets for the supply of medical devices in Australia displayed dynamic characteristics. Market inquiries indicated that surgeons and hospitals would switch from the merged firm to the alternative products offered by established suppliers and also new entrants, should the competitive offering of the merged firm be reduced following the proposed acquisition.

The ACCC in its assessment also noted the role provided by the Prostheses List in the private sector and the degree of constraint this provides on pricing to the private sector for a device once it has been included on the Prostheses List.