Affected market: Medical products
The OFT’s decision on reference under section 22(1) given on 3
August 2006. Full text of decision published 17 August 2006.
Please note that square brackets indicate figures or text which have
been deleted at the request of the parties for reasons of commercial
Coloplast A/S (Coloplast) is a Danish company active in the
development, manufacture and marketing of disposable medical products.
In the UK, Coloplast distributes continence, ostomy, wound and breast
The target is the urology business of Mentor Corporation (Mentor)
excluding Mentor's UK male external catheter (MEC) business. (see [Note
1]) The target, referred to as the ‘Urology Business’, develops, manufactures
and supplies a range of medical devices and surgical products that provide
solutions for a broad range of urological problems. The Urology Business’
UK turnover in the year ending 31 March 2006 was around £[ ] million.
Coloplast completed the acquisition of the Urology Business on 2 June
2006 and the statutory deadline expires on 1 October 2006. The OFT's
administrative deadline expires on 3 August 2006.
As a result of this transaction Coloplast and the Urology Business have
ceased to be distinct. The share of supply test in section 23 of the
Enterprise Act 2002 (the Act) is met in respect of the supply of
intermittent catheters supplied through the community channel, where the
parties' combined UK share of supply will be [more than 25] per cent.
The OFT therefore believes that it is or may be the case that a relevant
merger situation has been created.
In June 2002, the Competition Commission (CC) cleared, subject to
structural and behavioural remedies (the CC Remedies), the acquisition
by Coloplast of SSL International (the CC 2002 Report). (see [Note 2])
The CC found there to be a substantial lessening of competition in respect
of MECs in the hospitals segment, and following that report the Secretary
of State for Trade & Industry imposed remedies:
(i) preventing Coloplast from renewing its agreement to supply
Mentor's MEC products, which it did under a distribution agreement that
expires in 2007, and (ii) an interim price cap on the supply of MECs to
hospitals until that time. Coloplast has told us that this transaction,
together with the sale of Mentor's MEC business to Rochester Medical
Corporation, bring about an early termination of the distribution
agreement between Coloplast and Mentor.
RELEVANT FRAME OF REFERENCE
The parties overlap in the development, manufacture and supply of
certain disposable urology products used in the field of continence and
ostomy care. These products provide solutions for a broad range of
urological problems. The overlaps are in each of three incontinence care
products (intermittent catheters, Foley catheters and urine drainage
bags) and each of two ostomy products (ostomy bags and ostomy
accessories). (see [Note 3])
Demand side substitutability between any of the above products is low.
The CC 2002 Report, which was concerned with similar product areas,
concluded that ‘at any point in time, the clinical assessment would
almost always lead to the choice of one product type in preference to
others, and [the] patient would rarely switch to an alternative
product except in response to a change in his or her condition.’ (see
[Note 4]) In addition, the CC also concluded that ‘low price
sensitivity militates against switching.’ (see [Note 5]) This
suggests that functionality and clinical factors are the main
determinants of demand, not price. Evidence received on this issue from
third parties during the assessment of this merger is consistent with
that view. Supply side substitutability is limited as it can take a
period of years for new products to be developed and listed on the Drug
Tariff. (see [Note 6])
We have assessed the following product scopes: intermittent and Foley
catheters, urine drainage bags, ostomy bags and ostomy accessories (in
particular, ostomy belts). We considered whether these product scopes
should be even narrower taking into account of differences between types
of products (for example closed and open ostomy bags). We concluded that
for the purpose of this assessment such further distinction is not
necessary because it does not alter the competition assessment.
The CC 2002 Report also distinguished between the two principal
distribution channels in the NHS: supply to patients in hospital and
supply to patients in the community. The parties submit that these ought
not to be considered as separate market segments. No firm conclusion is
necessary on this point because no competition concerns arise in either
The CC 2002 Report concluded that the geographic scope was the UK, given
the distinct regulatory framework for medical products in the UK and the
fact that there was little evidence of parallel imports. Third party
enquiries in this case indicate that this is the appropriate definition
in this case. We considered whether a narrower scope would be
appropriate, given that there are separate health administrations within
the four different countries of the UK. We consulted with the relevant
authorities in England, Wales, Scotland and Northern Ireland and
concluded that, as the arrangements are very similar, it is not
necessary to narrow the geographic scope any further.
For the range of overlap products, both parties have notably lower
shares in supplying hospitals than in supplying patients in the
community. The merging parties have shares of supply at their highest of
about 50 per cent for the supply of ostomy belts and for the supply of
urine drainage bags to patients in the community. However, in all
product areas, the increments added by the Urology Business are small
(less than 5 per cent in all overlapping product areas).
The OFT considers that a competitive constraint will continue to come
from competitors with large shares of supply, such Astra Tech and Bard
in continence care products, and Dansac and Convatec in ostomy products,
and in addition, a number of smaller players, including those of similar
size to that of Urology Business, remain present in these markets. Third
party inquiries do not suggest that Mentor was a particularly innovative
or maverick player in this market, so there is no reason to believe that
the Urology Business was imposing a constraint on Coloplast that was
disproportionate to its share of supply.
In a number of the product areas the two largest suppliers account for
about 80 per cent of supply. This may raise questions of co-ordination.
However, irrespective of whether the conditions for co-ordination exist
in this case, given the small increment from Urology Business and the
presence of a number of remaining similar sized suppliers, the merger
would not substantially alter the ability for coordination in this
A concern was raised by third parties that Coloplast, while not
acquiring Mentor's MEC business, might nonetheless acquire Mentor's
licence to operate a Dispensing Appliance Contractor (DAC), which is a
means of supplying patients in their homes. However, the parties have
confirmed that Mentor’s DAC licence has not been transferred to
Coloplast as a result of the transaction.
Two third parties were concerned that Coloplast could strengthen its
position in the MECs segment even without acquiring Mentor’s MEC
business. The suggestion made was that Coloplast has retained all
Mentor’s current contractual supply arrangements with nursing homes and
several Primary Care Trusts. Coloplast has told the OFT that it is only
acquiring Mentor’s patient list for the mail order home delivery
service conducted through Mentor’s DAC. (see [Note 7])
Coloplast has informed the OFT that it is not acquiring any contractual
arrangement with any third party.
The OFT considers that this concern is unfounded, as even if Coloplast
were able to switch all Mentor’s former home delivery patients to its
own branded MECs, the increment in Coloplast’s share would be small
([less than 5] per cent) on shares of supply in MECs in the UK of less
than 25 per cent in either supplying patients in the community channel
or both those in the community and hospital channels taken together. In
addition, third party enquiries suggest that instituting patient
switching between different brands of the same product is difficult
because of specific product characteristics.
THIRD PARTY VIEWS
A number of third parties were consulted and concerns expressed are
The parties overlap in the supply of several continence care and ostomy
products with shares of supply about 50 per cent in certain product
areas. However, in all sectors the increments are minor and the OFT
considers that the remaining competitors will continue to exert
sufficient competitive pressure on the merged entity.
After having assessed the vertical issues raised by third parties, the
OFT concluded that these concerns were unfounded due to the very small
increment and low level of switching.
Consequently, the OFT does not believe that it is or may the case that
the merger may be expected to result in a substantial lessening of
competition within a market or markets in the United Kingdom.
This merger will therefore not be referred to the Competition Commission
under section 22(1) of the Act.
- was acquired by Rochester Medical Corporation under a separate
- Competition Commission Report on Coloplast A/S and SSL International
plc merger. The CC assessed the effect on competition that the merger had in
several markets for continence care products including, sheaths (or male
external catheters), intermittent catheters, and urobags. See Competition Commission documents.
- These include: ostomy belts, deodorants, skin fillers and
protectives (such as barrier creams, pastes, aerosols, lotions, gels
and wipes); and skin protectors (such as wafers, blankets, foam pads
- Competition Commission Report on the acquisition by Coloplast of
SSL, June 2002; paragraph 2.36.
- Competition Commission Report on the acquisition by Coloplast of
SSL, June 2002; paragraph 2.36.
- The Drug Tariff contains a list of all appliances that can be
prescribed in the community on the NHS. It is compiled on behalf of
the Department of Health by the NHS Business Services Authority,
Prescription Pricing Division.
- Rocheter Medical is acquiring Mentor's DAC licence.