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FTC CONCLUDES INVESTIGATION OF MEAD JOHNSON

 FTC CONCLUDES INVESTIGATION OF MEAD JOHNSON
 EVANSVILLE, Ind., June 11 /PRNewswire/ -- Mead Johnson & Company and


the Federal Trade Commission have announced today the settlement of all competition issues pertaining to domestic marketing of infant formula. Filed in the U.S. District Court for the District of Columbia, the agreement ends nearly two years of FTC investigation with no finding of fault by the FTC or admission of liability by the company.
 The following statement has been issued by Donald G. Harris, president of Mead Johnson Nutritional Group:
 Mead Johnson and the Federal Trade Commission entered into a consent decree agreement today that confirms that the company will continue to abide by fair trade laws in marketing infant formula.
 This matter has been investigated for nearly two years by the FTC staff. The investigation ended with no finding or claim against Mead Johnson that it engaged in any collusive or conspiratorial conduct to reduce or interfere with competition.
 Initially, the investigation was prompted by accusations that the company was involved in collusion to fix prices, rig bids on government contracts and monopolize trade. None of these accusations involving Mead Johnson is true and, consequently, none has been substantiated. In fact, the complaint filed at the conclusion of the investigation did not allege collusion or conspiracy with regard to any of these issues.
 Rather, the complaint alleged the company engaged in three "non collusive facilitating practices." Such practices are independent actions that allegedly may suggest to competitors the company's future business plans. They do not involve any activity in concert with any other competitor.
 Mead Johnson unequivocally denies even these lesser allegations in the FTC's complaint. The company never has, nor will it ever, knowingly violate the law.
 We have cooperated fully in this thorough investigation, providing all documents and testimony requested by the federal agency.
 Under terms of the consent decree, Mead Johnson will:
 -- follow several practices that limit the possibility that individual actions of the company, although not involving collusive activity, might suggest future marketing plans to a competitor, and
 -- provide 3.1 million pounds of infant formula powder (or equivalent liquid concentrate) free of charge to the U.S. Department of Agriculture that it may use for humanitarian purposes, for example, distribution within the Special Supplemental Food Program for Women, Infants and Children (WIC) or as humanitarian aid to the republics of the former Soviet Union.
 The practices stated in the agreement are consistent with our company's past and current business practices. The contribution of infant formula to the USDA fits squarely with our tradition of concern for the nutritional health of children and of providing nutritional products to relief agencies in emergency situations.
 For example, we have aided the Kurdish refugees, the victims of Hurricane Hugo and, most recently, the families affected by the riots in Los Angeles. The 3.1 million pounds of infant formula represents enough formula to feed approximately 40,000 babies for one full year.
 Although we are confident that the company would have prevailed in litigation of the issues raised by the FTC, that litigation would have been time consuming and very expensive. The more appropriate alternative was to agree to continue our long-standing practice of providing formula for needy infants. We believe that this settlement serves a much more worthwhile purpose.
 -0- 6/11/92
 /NOTE TO EDITORS: In addition to Harris's statement about the settlement, the company is providing the following responses to specific questions about the details of the FTC settlement:
 1. What prompted the FTC investigation of the infant formula industry?
 Infant formula manufacturing is a highly regulated, highly concentrated and highly competitive business. According to the FTC, the three largest manufacturers of infant formula in the United States account for more than 90 percent of domestic infant formula sales.
 The product and its manufacturing process are complex, and the regulations of the Infant Formula Act of 1980 require each manufacturer's ingredients and processes to be similar. Historically, infant formula manufacturers' pricing has also been similar.
 Because of the similarity in pricing patterns, the FTC apparently was suspicious that the manufacturers were colluding to determine prices. Such collusion would be illegal. Mead Johnson never has, nor will it ever, conspire with another company to fix prices or limit competition, nor did the FTC find any such collusion to have occurred. No price fixing claims, or any other claims of collusive activity, are involved in this resolution of all FTC issues pertaining to Mead Johnson. Moreover, in recent years, Mead Johnson, through its Gerber alliance, has become an industry leader in price competition.
 2. If Mead Johnson has denied all of the FTC allegations, why did it agree as part of the settlement to contribute infant formula free of charge to the U.S. Department of Agriculture? Why not contest the allegations in court or in an agency procedure?
 For nearly two years, the FTC's investigation of these matters has caused considerable disruption and expense for our company.
 Mead Johnson has cooperated fully in the investigation, providing literally hundreds of thousands of documents and days of testimony as requested by the agency. The process has required extensive involvement by our management, our staff attorneys and our outside legal counsel.
 We feel particularly vindicated by the fact that the FTC has not found or claimed that Mead Johnson engaged in any collusive activity with our competitors, which was the suspicion that initially prompted the FTC investigation.
 When the possibility arose to settle the matter with a contribution of free formula that could be used for humanitarian purposes, we chose that opportunity. The reasons for choosing this kind of settlement are two-fold:
 -- First, there is the matter of business practicality of putting the matter behind us. Defense of these unfounded allegations has diverted the company's resources and has disrupted the orderly conduct of our business.
 -- Second, the contribution of infant formula to the USDA conforms to our company's tradition of concern for the nutritional health of children and of providing infant formula to relief agencies in emergency situations. Mead Johnson has provided nutritional products free of charge in numerous emergencies, such as after Hurricane Hugo, to the Kurdish refugees and, most recently, after the riots in Los Angeles.
 The amount of infant formula -- 3.1 million pounds of powder -- was negotiated with the FTC.
 3. One of the accusations pertained to marketing agreements and exchanging competitive information. What specifically was the allegation, and what has Mead Johnson agreed to do?
 The FTC did not allege that Mead Johnson conspired or colluded with any other infant formula manufacturers to reduce competition, but that Mead Johnson individually through "non-collusive facilitating practices" may have violated Section 5 of the FTC Act, which can prohibit unfair methods of competition even if there is no agreement or collusion with competitors.
 The issue specifically pertained to Mead Johnson's participation in the Infant Formula Council (IFC), an industry trade association comprising companies that manufacture and market infant formula in the United States. The IFC has been a forum for discussion of scientific, health and safety matters common to the industry.
 In the early 1980s, the infant formula industry was challenged to develop a U.S. alternative to the World Health Organization's International Code of Marketing of Breast-Milk Substitutes. With the active participation and guidance of its antitrust counsel, the IFC worked on a draft of a set of non-binding alternative guidelines for submission to the Department of Justice under its business review letter procedure.
 The World Health Organization Code, which is a recommendation to governments, prohibits direct-to-consumer mass media advertising of infant formula. This position continues to be supported by some medical organizations and consumer activist groups. A provision relating to direct-to-consumer advertising was proposed in the IFC's draft guidelines.
 The draft guidelines were never adopted by the Infant Formula Council, but the FTC staff maintained that, in the process of considering the guidelines, the infant formula manufacturers "exchanged information concerning each company's marketing practices and plans with respect to mass media advertising and other forms of direct-to-consumer promotion."
 Mead Johnson has denied this allegation, but to settle the matter has agreed:
 -- not to intentionally exchange information with any other manufacturer of infant formula relating to the advertising of infant formula through the mass media directly to the consumer;
 -- not to enter into any agreement with another manufacturer of infant formula that would restrict otherwise legal infant formula marketing practices; and
 -- not to solicit from any competitor adherence to restrictions on direct-to-consumer advertising, including restrictions promoted by the WHO and the American Academy of Pediatrics.
 The company believes that its agreements with the FTC are consistent with its past and current practices and will not adversely affect its business.
 4. Another of the accusations pertained to pre-bid communications for WIC contracts. What specifically was the allegation, and what has Mead Johnson agreed to do?
 Here again, the FTC did not allege that Mead Johnson conspired or colluded with any of the other infant formula manufacturers to reduce competition. Rather the agency alleged that Mead Johnson individually, through "non-collusive facilitating practices," may have violated Section 5 of the FTC Act, which can prohibit unfair methods of competition even if there is no agreement or collusion with competitors.
 The issue pertained to Mead Johnson's participation in the U.S. Department of Agriculture's Special Supplemental Food Program for Women, Infants and Children (WIC). The WIC program provides supplemental foods, including infant formula, and nutritional information to families with income levels that put them at nutritional risk.
 Infant formula manufacturers bid competitively on contracts to state and territorial WIC agencies to have their formulas provided to WIC recipients.
 In 1990, Mead Johnson sent a letter in confidence to the WIC administrators in four states to inform them that the company would have to reduce the size of its rebates to their state in the next round of bids on WIC contracts. States rely heavily on anticipated rebates from infant formula manufacturers to fund their WIC programs, and thus Mead Johnson officials felt that the four states needed early notification that they could not count on the same level of Mead Johnson subsidy as suggested by past bids.
 The information in the four private letters became known to competitors. The FTC acknowledges that this occurred "through disclosure by third parties," not by any action of Mead Johnson.
 But the FTC alleged that Mead Johnson "knew or should have known that the information contained in the letters would become known to its competitors."
 Mead Johnson has denied this allegation, but to settle the matter has agreed:
 -- not to disclose prior to the date for submission of sealed bids to a WIC program the amount or manner of its bid.
 The company believes its agreement with the FTC is consistent with its past and current practices and will not adversely affect its business.
 5. The only other accusation pertained to compliance with WIC federal regulations in Puerto Rico. What specifically was the allegation, and what has Mead Johnson agreed to do?
 Once again, the FTC did not allege that Mead Johnson conspired or colluded with any of the other infant formula manufacturers to reduce competition, but that Mead Johnson individually, through "non collusive facilitating practices," may have violated Section 5 of the FTC Act which can prohibit unfair methods of competition even if there is no agreement or collusion with competitors.
 The issue specifically pertained to Mead Johnson's participation in the U.S. Department of Agriculture's Special Supplemental Food Program for Women, Infants and Children (WIC), which provides supplemental foods, including infant formula, to families with income levels that put them at nutritional risk.
 In 1990, Puerto Rico requested bids to supply infant formula for its WIC program. The request contained options to bid for a "sole source system" in which the bidder supplies substantially all the infant formula for the program, or for an "open market system" in which all eligible manufacturers may supply infant formula for the program. Mead Johnson submitted identical sealed bids for both systems, but expressed preference for an "open market system."
 After the various manufacturers' bids had been publicly opened, it appeared that another competitor had won an exclusive sole-source bid, but Puerto Rico canceled the bid and issued a new request for bids. Mead Johnson again submitted the same identical sealed bids for both systems.
 The FTC alleged that because competitors knew Mead Johnson would bid in a manner to support an open market system instead of a sole source system, the rebates bid to Puerto Rico were lower than contemporaneous bids submitted to other WIC programs and, therefore, the federal government, which subsidizes the WIC program, was injured.
 Mead Johnson has denied this allegation, but to settle the matter has agreed:
 -- not to enter into any agreement with another manufacturer of infant formula regarding a bid for the right to supply infant formula to any WIC program recipients;
 -- not to request or knowingly encourage any WIC official to administer bidding on infant formula in a manner contrary to the requirements of federal or state WIC statutes or regulations;
 -- not to exercise an option to renew the current contract with Puerto Rico; and
 -- not to exercise any legal or contractual rights if Puerto Rico decides to terminate the existing WIC contract.
 The company believes that its agreements with the FTC are consistent with its past and current practices and will not adversely affect its business.
 6. Although the settlement with the FTC ends the federal government's investigation, are there not state government and civil complaints pending on these same issues?
 Yes. There are complaints and investigations pending in other jurisdictions on some of the same issues that were investigated by the FTC. However, the FTC made no finding or claim against Mead Johnson of conspiracy to reduce competition and chose settlement rather than pursuit of its theory of
"non-collusive facilitating practices." We believe that this should give little comfort to others attempting to press theories that have been rejected by the FTC.
 /CONTACT: Gerald R. Elliott, 812-429-7801 or, Holly D'Amour 812-429-8828, both of Mead Johnson/ CO: Mead Johnson & Company ST: Indiana IN: FOD SU:


LR -- NY088 -- 9486 06/11/92 19:17 EDT
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Date:Jun 11, 1992
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