FTC Provisionally Green-Lights Medical Device Company’s Acquisition of Dutch Counterpart with Asset Divestiture

The Federal Trade Commission (FTC) announced on Tuesday that for Stryker Corp.’s acquisition of Wright Medical Group N.V. to proceed, they will have to exit certain markets to alleviate antitrust and consumer welfare concerns. The agency’s press release explained that both companies’ total ankle replacements and finger joint implant product businesses are to be sold to California-based DJO Global.

According to Michigan-based Stryker, it is “one of the world’s leading medical technology companies and, together with our customers, is driven to make healthcare better.” It reportedly offers “innovative products and services in Orthopaedics, Medical and Surgical, and Neurotechnology and Spine that help improve patient and hospital outcomes.”

Wright is a Dutch global medical device company focused on “[e]xtremities and [b]iologics.” It is self-described as a “recognized leader of surgical solutions for the upper extremities (shoulder, elbow, wrist and hand), lower extremities (foot and ankle) and biologics markets, three of the fastest growing segments in orthopaedics.”

Stryker’s proposed $4 billion acquisition of Wright raised concerns that consumers would suffer from the elimination of competition in the total ankle replacement and finger joint implant markets. Specifically, the FTC’s complaint alleged that “(1) a combined Stryker-Wright would be able to unilaterally exercise market power; (2) research and development would be reduced; and (3) customers would be forced to pay higher prices.”

The FTC noted that “[t]otal ankle replacements are used to treat end-stage ankle arthritis, reducing pain while maintaining or increasing ankle motion.” Because Wright and Stryker are the largest and the third-largest suppliers of total ankle replacements, the merged company would “control approximately 75 percent of the U.S. market for total ankle replacements.”

As for finger joint implants, the press release explained that they “are used to treat advanced osteoarthritis in the hand, after other, less invasive options have failed.” In this market, Wright and Stryker are two of only three significant suppliers; the newly combined company would control more than half of the relevant market, the complaint alleged.

Thus, the Nov. 3 document contended that if consummated, the deal would violate Section 7 of the Clayton Act and Section 5 of the FTC Act. Under the proposed consent order, the companies must spin-off the relevant assets to DJO Global in order to “restore the competition that otherwise would be lost through the proposed acquisition.” The proposed order also requires Stryker to assist DJO Global with the transition and appoints a divestiture trustee to oversee the sell-off process.  

The FTC’s press release further explained that its staff “worked closely with counterparts at the UK Competition and Markets Authority to analyze the proposed transaction and proposed remedy.” The FTC also stated its intent to publish a consent package and instructions for the filing of public comments. After the 30-day comment period, the FTC said it will decide whether to finalize the proposed order.