COMPETITOR PROPOSAL AT ROOT OF DOJ ANTITRUST ACTION, ZIMMER SUGGESTS

Zimmer July 26 issued an update on the antitrust investigation initiated by the Department of Justice (DOJ) against the firm and four other companies.

The company noted it had received a subpoena from the DOJ's antitrust division June 23. The DOJ action is apparently linked to an email sent by an employee of a hospital (which Zimmer did not name) related to a bid process for orthopedic implant pricing conducted by that hospital in the fall of 2005, according to the company. That email mentioned the hospital's proposal to local representatives of various orthopedic companies, including Zimmer's local independent distributor, the company said.

A representative of one of Zimmer's competitors then sent an unsolicited message to the same group of competitors that received that email proposing that the companies adopt a uniform pricing strategy, according to Zimmer.

When Zimmer learned of the competitor's proposal, it "advised its local independent distributor to reject it on behalf of both the distributor and Zimmer, which the distributor did." The written rejection "stated emphatically that neither Zimmer nor its distributors will participate in pricing discussions with competitors and that Zimmer's policies insist on full compliance with the antitrust laws."

Throughout the fall and winter of 2005, Zimmer continued to engage in its own one-on-one pricing negotiations with the hospital, which led to a Zimmer-specific pricing arrangement in early 2006, the firm said, adding it is "cooperating fully" with the DOJ investigation.

Zimmer's second-quarter report can be viewed at investor.zimmer.com/releaseDetail.cfm?ReleaseID=205351&id=14 (http://investor.zimmer.com/releaseDetail.cfm?ReleaseID=205351&id=14).