Appeal from an order of the District Court for the Southern District of New York entered on March 20, 1980, by Judge Vincent L. Broderick denying the Government's motion for a preliminary injunction restraining the Siemens Corporation, a company engaged in manufacture and sale of diagnostic medical equipment, from acquiring assets of Searle & Co. used for the production and sale of nuclear medical diagnostic imaging equipment. Relief was sought pursuant to § 15 of the Clayton Act, 15 U.S.C. § 25, on the ground that the acquisition would violate § 7 of the Clayton Act, 15 U.S.C. § 18, by eliminating Siemens' actual and perceived potential competition in the nuclear field. Affirmed.
Before Lumbard, Mansfield and Kearse, Circuit Judges.
The United States of America appeals from an order of the District Court for the Southern District of New York, entered on March 20, 1980, by Judge Vincent L. Broderick, denying its motion for a preliminary injunction restraining Siemens Corporation (Siemens), a wholly owned subsidiary of Siemens A. G., a West German corporation, from acquiring certain assets of the Searle Diagnostics Division (SD) of defendant G. D. Searle & Co. (Searle), a Delaware corporation with its principal offices in Illinois. The complaint against Searle, which was filed by the government on March 12, 1980, pursuant to § 15 of the Clayton Act, 15 U.S.C. § 25,*fn1 claims that the acquisition would violate § 7 of the Clayton Act, 15 U.S.C. § 18,*fn2 in that it would tend substantially to lessen competition in the sale of nuclear medical diagnostic imaging equipment in the United States. Consummation of the proposed acquisition has been stayed pending this appeal. We affirm the denial of preliminary injunctive relief and vacate the stay.
Medical diagnostic imaging equipment is used, principally by hospitals, to provide images of internal body organs, tissues and structures for diagnostic purposes. There are four main types of such equipment: (1) ultrasound, which uses ultra-high sound waves (like Sonar) to form a cross-section of the patient's body, (2) X-ray, (3) computed tomography (CT) or computed axial tomography (CAT), which uses a computer to process X-rays diffracted from various directions through the patient's body to derive cross-sections of the body, and (4) nuclear, which consists of a gamma camera used to detect radiation emitted by radioactive isotopes introduced into the patient's body and a cathode ray with computer software to process and display the information conveyed by the radiation. Each of these four types of equipment is sufficiently differentiated to constitute a separate product market. In this case we are concerned with the nuclear medical equipment market. The United States is a separate geographic market for the sale of such equipment.
Nuclear medical equipment is highly sophisticated and quite expensive, often costing between $100,000 and $200,000, with hospitals the principal purchasers. Sales in the United States totalled approximately $100 million in 1979, or about 60% of the worldwide total. Production and sale of nuclear medical equipment in the United States is concentrated principally among four firms (Searle Diagnostics, Ohio Nuclear (now Technicare, Inc.), Picker Co. and General Electric Co.), with the distribution of total sales as follows:
1. General Electric 3% 7% 8% 15% 17%
Technicare, inc.) 22% 21% 20% 24% 20%
3. Picker 17% 18% 17% 16% 18%
4. Searle Diagnostics 50% 43% 42% 30% 22%
5. All Others*fn3 8% 11% 13% 15% 23%
These figures, plus the testimony of witnesses, indicate that the nuclear medical equipment market, while concentrated, has been competitive, with General Electric increasing its share from 3% to 17% in five years. Although the market grew substantially since the 1960's, when nuclear equipment was in its infancy, growth in demand has slackened, due in part to increased governmental regulation of hospital costs, leaving a prognostication that sales of nuclear equipment in the years ahead will only gradually increase. With the levelling of market volume there has been increased price competition, with the result that Ohio Nuclear (now Technicare, Inc.) has earned only 5% to 10% on its investment since 1975 and Raytheon, one of the "Others," lost money from 1976 to 1978.
Another casualty has been SD, the pioneer firm in the market. Its market share has dropped dramatically over the last five years. It lost approximately $15 million dollars in 1978 and, after imposing various economies, $2 million in 1979. According to testimony of senior Searle management officials, Searle determined in early 1979 that it could not justify investing the research and development funds required to keep SD technologically competitive, in light of the anticipated negative return on its investment in SD, and concluded that SD ...